The prevalence of type 2 diabetes is rising rapidly, devastating the lives of millions of Americans. Extensive studies demonstrate that inflammation induces insulin resistance, contributing to type 2 diabetes. Blood glucose levels are determined by a balance between insulin and counterregulatory hormones (e.g. glucagon and catecholamines); however, potential effects of inflammation on glucagon and catecholamine sensitivity have not been studied. Furthermore, signaling pathways that mediate inflammation regulation of hepatic steatosis are poorly defined. Our preliminary study suggests that NF- B-inducing kinase (NIK) is not only a novel regulator of glucagon/catecholamine sensitivity but also defines new pathways that regulate lipogenesis and fatty acid oxidation. NIK is a ubiquitously-expressed Ser/Thr kinase activated by a subset of cytokines, and is required for the activation of the noncanonical NF- B2, but not the canonical IKK /NF- B1, pathway. NIK regulates T cell, B cell, and osteoclast development, but its role in metabolism has not been studied. We observed that NIK enhanced the ability of glucagon to increase cAMP levels and hepatic glucose production (HGP) but did not directly regulate insulin signaling. NIK phosphorylated CREB and increased its stability. CREB mediates glucagon/catecholamine stimulation of HGP and also promotes lipogenesis. NIK null mice developed glucagon resistance and were protected from dietary hyperglycemia and hepatic steatosis. Deletion of NIK decreased lipogenesis and increased oxidation in hepatocytes. Hepatic NIK was aberrantly activated in obesity; CREB and activated NF- B2 levels were increased in the livers of mice with obesity and humans with alcoholic fatty liver disease or hepatitis C. Obesity was associated with an increase in Cdc37 (an Hsp90 cochaperone) that bound to NIK. We propose that hepatic NIK is abnormally activated in obesity due to dysregulation of NIK chaperones (Cdc37/Hsp90), NIK E3 ligases (cIAP1/2), and hepatocyte-Kupffer cell crosstalk. Obesity-associated NIK overactivation increases glucagon/catecholamine sensitivity, HGP, and lipogenesis through CREB, and decreases oxidation through NF- B2. In Aim 1, we will determine whether hepatic NIK cell-autonomously promotes glucagon/catecholamine sensitivity by increasing CREB stability and decreasing cAMP (a second messenger for glucagon and catecholamines) degradation, and whether hepatocyte-specific deletion of NIK protects against type 2 diabetes. In Aim 2, we will determine whether hepatic NIK directly promotes lipogenesis via CREB and suppresses -oxidation via NF- B2, and whether hepatocyte-specific deletion of NIK protects against hepatic steatosis. In Aim 3, we will determine whether obesity is associated with dysregulation of the Cdc37/Hsp90 chaperone machinery, cIAP1/2 E3 ligase activity, and hepatocyte-Kupffer cell crosstalk, and whether these three factors drive NIK hyperactivity. The outcome is expected to lead to new therapies for hepatic steatosis and type 2 diabetes by targeting the NIK pathways.